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Property and Divorce : Matrimonial Property Regimes

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One of the most thematic discussions in family law is the extent, if any, to which the state should be able to dictate the division of property during a marriage and divorce.

English matrimonial law differs from matrimonial law in other EU Member States (and even our close neighbour Scotland) in two fundamental ways:

  1. In England and Wales, agreements between spouses before, during and after the relationship do not have the force of a binding and enforceable contract; and
  2. We do not have a matrimonial property regime which governs the ownership of property during, and at the end of marriage. 

These two aspects of English law mean that the state plays a much bigger role within a marriage, than in any other EU Member State.  Some appreciate the state’s involvement, seeing it as necessary to protect the financially weaker party.  Others say that the state’s involvement is patronising and undermines the parties’ freedom to govern their own relationships. 

Marital agreements

In England and Wales, the most obvious way that a state involves itself in a marriage is to dictate that, at the end of the marriage, any agreement the parties reach as the division of property cannot be binding and enforceable without a judge approving it.  This significantly reduces the impact of parties contracting between themselves.

On the continent and in Scotland, lawyers find the fact that marital agreements are not binding in England and Wales extremely unusual.  It is quite common on the continent for marital agreements to be entered into without financial disclosure being exchanged (something English lawyers consider essential, where they are preparing such agreements) but it is accepted that if a marital agreement has been entered into, it will generally govern the division of property at the breakdown of the relationship and on divorce .

There has been some small movement towards the continental and Scottish position in the Supreme Court decision of Radmacher v Granatino, which held that martial agreements, if properly formed, will be presumed to be binding, unless they are unfair when reviewed by the court.  However, to have binding force where the parties are at loggerheads, they will still need judicial approval.  At paragraph 75 it was stated that:

“the court should give effect to a nuptial agreement that is freely entered into by each party with a full appreciation of its implications unless in the circumstances prevailing it would not be fair to hold the parties to their agreement.”

This decision was considered radical in English law in 2010.  Why that was so, is most easily understood by looking at the previous case law. 

In the 1929 case of Hyman the court held that an agreement that a husband will pay his wife £20.00 a week for life in return for her refraining from issuing matrimonial proceedings against him was void because it was against public policy.  Lord Atkin stated that “the wife’s right to future maintenance is a matter of public concern which she cannot barter away.”

This decision was consistently upheld but by the 1990s pre-nuptial agreements had started to come before the English court. Mr Justice Thorpe (who later moved up from the High Court to the Court of Appeal) stated in the case of F v F [995] (known as the Flick case) that pre-nuptial agreements “must have very limited significance.  The rights and responsibilities of those whose financial affairs are regulated by statute cannot be much influenced by contractual terms which were devised for the control and limitation of standard that are intended to be of universal application throughout our society.”

However, twelve years later, and sitting in the Court of Appeal, Lord Justice Thorpe in the case of Crossley [2007] referred to the pre-nuptial agreement in that case as being of magnetic importance.

In 2008 in the case of McLeod v McLeod, a Privy Council case concerning an Isle of Man divorce in which the parties had signed a post-nuptial agreement, the court retreated from this position.  The court held that for it to find that a nuptial agreement might be enforced would require a change in the law which could be made only by the legislature.

Radmacher v Grantino followed this and the position has not moved forward since this date.

As a result, European and Scottish couples moving to England and then divorcing in England might be surprised that they have the ability to challenge their own nuptial agreement before the English courts despite its binding nature within their own jurisdiction.

Matrimonial Property Regimes

The vast majority of EU citizens except for English citizens understand what a matrimonial property regime is – because if they are married, they have a particular regime covering the property within their marriage.

For the benefit of English citizens, a matrimonial property regimes might be defined as follows: a set of rules relating to the economic relations of spouses between them and vis-à-vis third parties.

The most common regime is separation of property.  This is known in France as séparation de biens; in Germany as Gütertrennung; and in Italy as separazione dei beni.  The most basic arrangement within this regime is that all property, whether pre-martial or marital, is owned separately by the party that paid for it.

This regime can be developed to provide that any accrual of capital during the marriage is to be shared on divorce or death.  This is also fairly common, and is known in France as participation aux acquits; in Germany as Zugewinngemeinschaft; and in Italy as partecipazione agli acquisti.

Another matrimonial property regime is Community of Property, and this provides that all property in the marriage is owned jointly, except for gifts and inheritances. This is known in France as communauté réduite aux acquits; in Spain as sociedad de gananciales; in Germany as Errungenschaftsgemeinschaft; and in Italy as comunione degli acquisti.

Further, there is a regime called Absolute Community of Property where all pre-marital and marital property is owned jointly. In France this is known as communauté universelle; in Spain as comunidad absoluta de bienes; in Germany as allgemeine Gütergemeinschaft; and in Italy as communione universale dei beni.

We have no matrimonial property regime in England and European lawyers find this difficult to understand, and ask the question “who decides who owns what?”  The English lawyer’s answer is “ultimately, the judge.”

In 2006 in the case of Miller: McFarlane Lady Hale tried to clarify the system of property ownership during marriage in England, saying:

[para 123] “English law assumes the separation of property during the marriage.  Each spouse legally has control over his/her property for as long as the marriage lasts….”

Therefore, after the marriage ends there is [para 153] “…..a margin for one of the parties to acquire and keep separate property which will not automatically be shared equally between the parties.”

Indeed, transferring a solely owned property from one spouse to another is a daily activity of the English divorce courts, but it is an action that many European matrimonial courts do not have the power to do.

Sir Mark Potter in the Court of Appeal in Charman [2007] at para [124] described the English system, as follows: “we have no [matrimonial property] regime, simply accepting that each spouse owns his or her own separate property during the marriage but subject to the court’s wide distributive powers in prospect upon a decree of judicial separation, nullity or divorce.”

Will English law move towards allowing matrimonial property regimes to be elected and implemented by spouses?

The way I see the law moving is that this will take place via pre-nuptial agreements, in which parties elect matrimonial property regimes and these agreements are upheld in the English courts more and more frequently.  Indeed, we now have a presumption that fair agreements should be upheld. 

I also hold the view that one particular judge is trying his best to create his own matrimonial property regime in the lower courts.  This is Mr Justice Mostyn.  He has stated that in the event of divorce the following regime should apply to the division of property:

This was in the case of JL v SL (No 2) [2014] EWHC 360 (fam).

In my view, Mr Justice Mostyn's position cannot be held in a vacuum: there first needs to be an answer from the government as to the extent to which it is willing to allow its citizens to contract and decide the division of capital on divorce first.

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